I have been monitoring a few other inner city building projects that started last year, around the time I began my semi detached project. At the time I was really aggravated because my bad management jeopardized my schedule:
- My lumber yard was late delivering my footing package - so my footing crew showed up and did not have enough material to finish the job. This delayed my footing since the crew left and did another job (the one shown in the photo below). This was my mistake for not getting the package delivered sooner.
- The pour was jeopardized due to the cold just because of this small delay. With a very cold weather coming we were barely able to get the foundation poured in time (Dec. 2). The delay of the lumber yard could have cost me two weeks delay as it became -20C outside, way too cold to pour.
- I was able to get my cribbing company owner to tell the concrete company to pour my basement footing as a rush job, and this was successful thanks to the leverage he had being a huge customer of that concrete plant. With the footing poured the cribbing crew put up the walls and we poured two days before the cold snap hit. By the time the weather arrived, my water proofing was applied to the foundation and we could inspect and backfill, and get the framing material ordered. We started framing Dec. 20th, before the project shown below even had its walls poured.
Now, almost four months later, we see where that project is in terms of progress:
This project was excavated and footing poured the same day as mine (Nov. 22). It is mostly framed, and the windows and roof are going on.
My project will have the drywall taped at the end of the week, ready for ceiling texture and sanding the walls for priming. The furnace is operating, water and sewer is connected, the siding and stucco is being prepped (house is waterproofed in case of rain), and we are nearly ready to start interior carpentry (doors, trim etc). In addition to the progress, we have half the project sold and a completion date we are working toward. The project that started the same day as mine has yet to do plumbing, mechanical, or electrical. All of this means that job is about two months behind mine - if it was progressing the same pace as mine has. More than likely this job is 2-3 months behind and growing further behind each day. The cost of this is significant to either the builder, or maybe these are sold houses and the client is funding the carrying cost. The cost to carry the project is substantial:
- Cost of capital - there is an investment of at least $700k in that project to date, mainly land, foundation, and lumber, someone is incurring the cost to finance that money or it is a big opportunity cost to have that money used unproductively - about $3000/month (at 5%). If there was a high rate construction mortgage attached to the project, the interest could be vastly more. Many of these projects are leveraged using high cost private financing.
- Cost of site services - there is an electrical bill, fencing, toilet rental at a minimum with monthly fees. This is likely over $300/month
- Cost of property tax - at this point the City has likely re assessed the project upwards, likely the June property tax lump sum will need to be paid and be about $4500. This is another $357/month that the owner must pay (and in return benefit from zero city services)
- Cost of insurance - the builder is paying construction insurance, this could be another $400/month.
- Finally, the frustration of watching a project go nowhere, $ value priceless.
So the project above is costing someone $4000/month ($133/day or $5.55/hour 24/7), plus delaying the move in date significantly (perhaps the future owner is paying rent at another $2000/month while watching his home not be built), and it is either being mismanaged on their behalf by the builder, or the building company is incurring this cost and will suffer from reduced profitability when they eventually do complete and sell the project. I would be furious is this was a project I was paying for and in addition to the carrying cost I was paying a management fee to the builder. That would be an awful position to be in, having a builder collecting a management fee from a client (could be 12.5-15% for this work), and watching as the pace of progress is totally unacceptable. If I was in that position I could probably quit my day job and save my salary by actually managing my house project effectively by firing the contractor.
This is such a common issue in the inner city vs. the suburban tract builder business practices. The suburban builder will do possibly hundreds of homes per year, with that volume they can't possibly be working slowly. Yet in the inner city, most builders only do a few houses per year, and they are much less professional in their approach (as shown above). There is literally zero reason for managing a project as badly as the above project is being managed other than total incompetence. I guess it is possible the builder just wants to build slowly, or is occupied elsewhere in another project, or just doesnt care about the cost of slow building. I often wonder how someone has the resources to tackle a $1.5M project, but not the ability to manage the project. How do you generate $1.5M in financial capacity, yet undermine your own business by working so slowly such that the monthly carrying cost grows to such a significance to absorb most of the potential profit before the houses are even sold.
Unfortunately, at the beginning of a job the client can't possibly know how well it will be managed by the builder. I recommend a potential client ask for references from the builders' trades, rather than just the home owner clients. The trades know a lot more about how a builder operates than clients. If the trades view the builder as competent, that suggests the project runs smoothly, schedules are kept, and mistakes are minimized.
What project would you rather be a client of? This one, with the plumbing, electrical, mechanical, inspections, insulation and drywall finished, with the heat on, plugs energized so trades can plug in anywhere in the house to run tools, exterior sealed up against the elements, and the kitchen, flooring and tile all ordered and organized, or the house pictured above, where the interior work hasn't even started, and the windows are not all installed, even though both basement footing were poured on the same day (Nov. 29)?
I will drive by the project shown above in a month or two, and update on its progress. Once I finish my houses, and have an occupancy certificate I will monitor how much longer it takes to reach completion. Then I will estimate the carrying cost for the difference between my completion date, and that of the project that started the same day as mine.